Hey Traders,
Big Money doesn’t play around …
So when I catch an usual volume trade that’s not only bearish, but VERY bearish …
I know it’s not time to play games.
Check out this Big Money trader, who certainly isn’t toying around …
Mattel, Inc. (Ticker: MAT) is making a recovery after a sharp fall earlier this month. After tapping an intraday low of $21.07, MAT has rebounded, though it is still below it’s May highs just below $27 …
Though to be fair, those highs represent MAT’s highest highs since 2017 … so sitting just below those levels is nothing to sniff at!
Following the long holiday weekend, MAT managed to rally 1.6% during Tuesday’s trading session to close at $25.12
As one of the largest toy and children’s brands in the world, MAT reported better-than-expected earnings in late April, and many analysts are saying the toy maker could have as much as 30% upside to come, in spite of MAT’s recent (and relatively minor, in the grand scheme of things) slip.
In addition, the toy company looks to be trying to increase its footprint in the children’s entertainment industry, and the company recently unveiled plans for a new theme park near Phoenix, Arizona.
From the looks of things, though, at least one Big Money trader isn’t playing nice with MAT …
On Tuesday, a pretty massive bearish bet crossed the tape in MAT’s pits:
This trader opened a total of 18,000 bearish put spreads on the stock, buying the October 23-strike puts for $2.12, while selling the 19-strike puts for $0.70.
This trade would have had a price tag of $2,556,000 …
But Big Money wasn’t finished jut yet.
They actually added to their bearish stance with the sale of 18,000 October 27-strike calls for $1.60, bringing in a total of $2,880,000.
This means rather than paying $2,556,000 for their put spread, they actually earned $324,000 from this trade, which they’ll be able to keep if MAT fails to break above the $27 mark – or the $28.60 breakeven price of the calls – before October expiration.
However, the sale of the calls does change the risk dynamics of this trade …
With the put spread, Big Money’s losses were capped.
With the call spread, a hearty rally out of MAT opens this trader up to quite a bit of risk.
After all, if MAT does indeed break through the $27 mark, this trader will start racking up losses on 18,000 contracts of calls … the equivalent of 1,800,000 shares.
This bearish bet is also notable simply because of its size when compared to MAT’s typical options volume.
Currently, the 36,000 puts make up slightly over half of all put open interest in MAT’s puts, with 71,662 total contracts open across all terms (that’s more than 222% over average), and the 18,000 open calls account for just under 30% of all call open interest, with 61,334 calls outstanding (252% of MAT’s normal call open interest).
I mean, take a look at the open interest on neighboring strikes in the October term …
Clearly, Big Money has a motive here …
While we may not know the true reason behind the trade until it’s too late, this Big Money bear certainly opens up some interesting potential piggybacks …
Your Only Option,
Mark Sebastian